KENYA Law and Practice Contributed by: Walid Khan, Ruth Wangui Rukwaro and Christina Wanjiku Wood, Africa Law Partners
3.5 Agent and Trust Concepts Agent and trust concepts are recognised and often used, particularly where there are multiple lenders or in syndicated facilities. 3.6 Loan Transfer Mechanisms Kenyan law permits the transfer of loans and security instruments. 3.7 Debt Buyback Debt buybacks are permitted in Kenya. Pursuant to the Consumer Protection Act, a borrower is entitled to pay the full outstanding balance under a credit agree- ment at any time without any prepayment charge or penalty. This provision of the law does not apply to a credit agreement where the national or the county government is the principal borrower or guarantor or where the borrower is a public entity or where the lender is either a bilateral or multilateral foreign finan- cial institution. 3.8 Public Acquisition Finance “Certain funds” provisions are designed to guarantee that the necessary financing is fully committed and readily available to complete the deal. This reduces uncertainty for target shareholders and regulatory bodies. These requirements are outlined in the Capi- tal Markets (Takeovers and Mergers) Regulations under the oversight of the Capital Markets Authority, ensuring that acquirers demonstrate proof of fund- ing through irrevocable commitments from lenders or cash reserves. Long-form documentation is common- ly used for these transactions and these are publicly filed with various obligations to ensure integrity of the process. 3.9 Recent Legal and Commercial Developments Digitisation of Registries has resulted in online pro- cessing of registration applications and, in some instances, online execution of documents. Kenya also continues to strengthen its anti-money laundering framework under the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA, 2009) and CBK guidance, reflecting FATF recommenda- tions. This has led to enhanced KYC, reporting and due diligence provisions in loan documentation, par-
the CBK under the Central Bank of Kenya Act (Cap. 491) and the Foreign Exchange Regulations, 2015, to prevent money laundering, capital flight and economic instability. While businesses and individuals can free- ly transact in foreign currency, large transactions are subject to reporting, documentation and compliance requirements. General Framework The following apply in relation to foreign currency exchange. • There are no caps on the amount of foreign cur- rency that can be remitted abroad, provided proper documentation is provided. • All foreign exchange transactions must pass through CBK-licensed commercial banks or authorised dealers. • The Kenyan shilling remains the only legal tender in domestic transactions, though loans, contracts and investments may be denominated in foreign currencies (typically USD or EUR). Reporting and Documentation Requirements The following requirements should be noted. • Banks require supporting documentation for material foreign exchange transactions exceeding USD10,000. • Banks must report such transactions to the Finan- cial Reporting Centre (FRC) under the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA, 2009). • Payments abroad (eg, loan repayments, dividends, royalties) require documentation such as loan agreements, board resolutions or invoices, which are verified before remittance. 3.4 Restrictions on the Borrower’s Use of Proceeds Kenyan law does not impose blanket statutory restric- tions on how borrowers use loan proceeds. Instead, restrictions are largely contractual, embedded in the loan agreements negotiated between lenders and bor- rowers.
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